CORRUPTION OFFENCES: Government of Kazakhstan in the ERG Board of Directors

STATEMENT

(in accor­dance with Article 181 of the Code of Criminal Procedure of the Republic of Kazakhstan)

On October 27, 2022, the Elge Qaitaru Public Foundation addressed you with a state­ment regard­ing the activ­i­ties of the Eurasian Group (ERG).

On December 15, 2022, we received a response from the Ministry of Finance of the Republic of Kazakhstan to the above statement.

In addi­tion, we have at our dis­pos­al the response of the Ministry of Finance to a sim­i­lar request from NEGE Media LLP about the activ­i­ties of the same com­pa­ny and a num­ber of oth­er documents.

An analy­sis of the avail­able doc­u­ments allows us to con­clude that a sig­nif­i­cant dam­age was caused to the inter­ests of the Republic of Kazakhstan. This dam­age is the result of the action or inac­tion of the for­mer mem­bers of the Government of the Republic of Kazakhstan Mr. Marat Beketayev, Mr. Bakhyt Sultanov and Mr. Beybut Atamkulov in the process of rep­re­sent­ing the inter­ests of our state as mem­bers of the ERG Board of Directors.

1. It fol­lows from the response of the Ministry of Finance to NEGE Media LLP that for the peri­od from 2017 to 2021 in favor of the Republic of Kazakhstan, which owns a 40% stake in ERG, div­i­dends total­ing $365.6 mil­lion were accrued.

At the same time, from cor­po­rate report­ing avail­able on the ERG.sarl web­site, it fol­lows that the com­pa­ny’s EBITDA for 2017 is — $ 2.09 bil­lion, for 2018 — $ 1.913 bil­lion, for 2019 — $ 1.538 bil­lion, for 2020 — 2.023 bil­lion dol­lars, for 2021 — 4.210 bil­lion dol­lars, and free cash flow (free cash flow) only by the results of 2021 amount­ed to 1.830 bil­lion dollars.

A sim­ple arith­metic cal­cu­la­tion shows that ERG’s prof­it for the peri­od 2017–2021 was $11.774 bil­lion. Considering that the share of the Republic of Kazakhstan in the ERG is 40%, why were accrued div­i­dends over that peri­od equal to $365.6 mil­lion instead of sev­er­al bil­lion dollars?

2. Our state­ment also raised the issue of the exces­sive debt bur­den of Kazakh enter­pris­es of the Eurasian Group. However, in its response, the Ministry of Finance, while rec­og­niz­ing the group’s debt of $7 bil­lion in 2021, reas­sures us that the net debt to EBITDA ratio is about 1.5. However, the ERG cor­po­rate report­ing proves that in 2021 its debt exceed­ed EBITDA almost twice, and by 3–4 times in the pre­vi­ous years. The doc­u­ments we have at our dis­pos­al show that there is no clear pur­pose in the bil­lions of dol­lars of cred­it agree­ments between the Kazakhstani enter­pris­es of the ERG and the sanc­tioned Russian banks VTB and Sberbank, which allows us to con­clude that the pur­pose of obtain­ing these loans is to enslave Kazakhstani enterprises.

3. Another con­cern for the Kazakh econ­o­my was the issue of intra-group loans, and the Ministry of Finance sees noth­ing wrong with that. The doc­u­ments at our dis­pos­al indi­cate that under the agree­ment dat­ed December 2, 2021, the Kazakhstani enter­pris­es of the Eurasian Group pro­vid­ed a loan to the par­ent for­eign com­pa­ny equal to $500 mil­lion. In addi­tion, on January 10, 2022, imme­di­ate­ly after the so-called “January clash­es”, the ERG decid­ed to with­draw anoth­er $1.1 bil­lion from the coun­try by pro­vid­ing a loan from its Kazakh enter­pris­es to a par­ent com­pa­ny reg­is­tered in Europe. As the result of these actions alone with­in a short peri­od of time funds equal to $1.6 bil­lion were with­drawn from the coun­try. There is some infor­ma­tion about oth­er sim­i­lar loans. At the same time, it must be not­ed that a num­ber of Kazakhstani enter­pris­es of the ERG are bor­row­ers under loans received from the Development Bank of Kazakhstan and the Eurasian Development Bank, one of the founders of which is the Government of Kazakhstan.

The with­draw­al of mon­ey earned by Kazakhstani enter­pris­es from the sale of the coun­try’s nat­ur­al resources or from loans from the state bank caus­es enor­mous dam­age to the repub­lic’s economy.

In addi­tion, in prin­ci­ple, the ques­tion aris­es of the expe­di­en­cy and legal­i­ty of the that the ERG is reg­is­tered in the Grand Duchy of Luxembourg, since almost 68,000 of the ERG’s employ­ees or more than 94% of its staff work at the ERG enter­pris­es in Kazakhstan. Does not this cir­cum­stance cre­ates con­di­tions for com­mit­ting cor­rup­tion offences?

We believe that all inter­nal cor­po­rate deci­sions that led to these facts are sig­nif­i­cant and couldn’t be made with­out the par­tic­i­pa­tion of rep­re­sen­ta­tives of the Government of the Republic of Kazakhstan in the Board of Directors of the ERG. At var­i­ous times these func­tions were per­formed by the for­mer mem­bers of the Government, Mr. Marat Beketaev, Mr. Bakhyt Sultanov and Mr. Beybut Atamkulov.

We believe that in these cas­es, the indi­cat­ed per­sons com­mit­ted crim­i­nal offences under Part 4 of Art. 370 and part 1 of Art. 371 of the Criminal Code of the Republic of Kazakhstan, and caused sig­nif­i­cant harm to the inter­ests of the State.

In this regard, we ask you to check the activ­i­ties of the above-men­tioned rep­re­sen­ta­tives of the Government of Kazakhstan in the ERG Board of Directors for cor­rup­tion offences, reg­is­ter this appli­ca­tion in the auto­mat­ed data­base of crim­i­nal offences, ini­ti­ate a crim­i­nal case, pros­e­cute those respon­si­bly, rec­og­nize the Republic of Kazakhstan as a vic­tim and tell us the reg­is­tra­tion num­ber of the crim­i­nal case.

We have been warned on crim­i­nal lia­bil­i­ty under Art. 419 of the Criminal Code of the Republic of Kazakhstan.

Elge Qaitaru Foundation